I often get the question, “How do I figure out what my house is worth?” This is an important question whether you need to sell your house quickly because of your current situation or if you simply want to list your house on the market to sell through typical channels. In this post we will dive into the basics of how to determine the asking price for a house.
It is important to understand what is involved in coming up with a value for your house. Value, when discussing a house, is typically associated with price and what someone is willing to pay for it. In order to come up with an estimate for what your house might sell for you must look at other houses that have sold recently. There are a few major criteria to consider when comparing your house to others.
1) Location – You want to have houses that are in the same neighborhood as yours or as close as possible
2) Size – The houses being used for comparison need to be of similar size in sqft and in number of stories
3) # of beds/baths – You want the comparable house to have the same number of beds and baths, if possible.
4) Features – The house needs to have similar features such as lot size, garage, pool, # of living areas, etc)
5) Condition – The house needs to be in similar condition as your house. The level of updates, flooring, brick or siding, etc. all need to be considered. You can’t compare a new house to a run-down house and expect the values to be similar if all else is equal.
The key to all of these criteria is finding similarities in the comparable houses to your house. It’s important to make sure these criteria are as similar as possible because that will give you a good idea of what the house will sell for. Another criteria to note is how recently a comparable house sold. You want to find a house that is as similar as possible in the physical aspects and has also sold within the last 3 months. This gives you a more accurate feel for what the current market might be willing to pay for your house. The further out you go, the less accurate the value. You do not typically want to use any comparable properties that are over 6 months old.
It is important to use the right tools to come up with the comparable houses and prices used to make these comparisons. We use a variety of tools to find comparable properties and here are a few of the sources:
2) Zillow, Trulia, Redfin, etc.
3) County Appraisal District
These are most of the sources that are useful when searching for comparable house pricing but others do exist. Some are better than others and the majority of the time comparable value will be figured using recently sold comparable properties from the MLS. MLS stands for Multiple Listing Service and is only accessible by licensed real estate agents. This is the most accurate source because it allows you to see the actual price that a house sold for, how long ago it sold, pictures of the house for comparison, etc.
When getting data from Zillow, Trulia, and Redfin you are seeing what the last list price a house was at before it sold. In actuality, most houses do not sell for their list price and this discrepancy can throw your price estimation off. This source is to be used with caution as it can lead you down the wrong path.
The county appraisal district is also another source for property values. It is probably the least accurate of all. I have found that the values typically displayed by the appraisal district are lower than where the market is at. This can fluctuate with market trends and cycles, but currently this is the reality.
All of this data is used to find 3-5 houses that are as similar as possible to your house. You must take into account all of the above criteria and weigh them against your house. The houses that compare more closely need to be given more pull when considering the prices and adjustments that need to be made. Changes to the price should reflect measurable differences such as smaller size in sqft or lack of a pool. In the end, you take an average of all of the sell prices, adjusted for similarities and differences, to get the list or asking price for your house. Determining these values is an art and requires practice and market knowledge to get the most accurate estimate possible.
It is important to know that the price your house should be listed for it is not an absolute value. It is merely a best guess estimate of what your house should sell for based on what other people have paid for similar houses over the recent months. The only way you will know what the house will sell for is when you have another person agree to buy it and make you an offer that is accepted by you and goes to closing.
This overview, while not an in depth analysis, should give you an idea of what is required to come up with a list/asking price for you house. I suggest that you get in touch with an industry professional, such as a real estate agent to get an accurate estimate of your house value. You can contact me if you have any questions or need to be referred to an agent.
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